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month of any software product always is, if you do things perfectly. But at the time, I just had no idea what to expect.
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Livingston: Was there a time during that first year when you thought, We ve
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lost our clients. Time to close up shop
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Spolsky: We never thought we would close, because we had this theory that
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Fog Creek would continue as long as Michael and I could eat and pay whatever external obligations we had. There was no reason to completely and thoroughly give up. And that s pretty much what it got to. In the first year, I d say revenues off of FogBugz averaged like $10,000 or $15,000, and that was enough to live on. It was growing at a reasonable rate I remember literally every month it would grow at least 100 percent a year. And that gave us the confidence that we could wait this out. There was money coming in, and the amount of money coming in was going up every month. So there was no reason to give up and go home. The theory was that we would only give up when there wasn t enough income even to pay the minimum bills we had to pay. I think our monthly overhead was $5,000 mostly rent, but also office supplies and T1 and that kind of stuff.
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Livingston: It seems like you have a really unique corporate culture one that
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values hackers. Did you plan this from the start
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Spolsky: Absolutely. Remember, the original model was, How can we become
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a big consulting company and then build a software company inside a consulting company The consulting company was a means to an end. It was to get cash flow, so that you could build a real software company. And when you were done, the theory was you d still have these consultants, but software companies often need consulting arms. The basic economic model for us and ArsDigita and those kinds of companies was that you could get a bright MIT grad or whatever and give them a salary of $75,000 to $125,000 a year, depending on experience. That comes out to, at most, $60 an hour, and the billing rate was $200 to 250 an hour for building database-backed websites.
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Livingston: Wow. Spolsky: Yeah. Obviously it was just an arbitrage condition that all these startup
companies were trying to take advantage of. The question is, how do you get the bright MIT grad to work for you and not somebody else What was astonishing at the time was that none of these companies were making any effort whatsoever to make the work environment pleasant and to treat the people that they were hiring with enough respect that they would be able to attract people. You would go into companies there were a lot of them in New York: Scient, for example and they would have millions of desks crammed into the most crowded room where they would pack people in like herrings and treat them as interchangeable cogs. It was not a fun work environment. There was not a lot of respect for the developers. There was not a lot of treating developers well and making them feel like they were the hotshots in the organization.
Joel Spolsky 351
Things that to us are basic: Aeron chairs; private offices with doors that close for every programmer; letting programmers report to other programmers, so that your boss will understand you. We had 4 weeks of vacation and another week of holidays, which you can move I think. For the consulting business, we had a rule that you fly first class and that you never be away from home on a weekend. We actually figured out the entire business model, and we figured that, if we spent 4 percent more or 8 percent more giving people a better work environment in these particular ways, everybody would want to come work for us and not go to the Scients and the Razorfishes of the world. And that was going to be our business model. Everybody is charging $250 an hour for these consultants and paying them $60 an hour. We would pay them the equivalent fully burdened of $64 an hour. That was our clever trick that we came up with, and that s what we thought our innovation was. It turned out not to have been what we did.
Livingston: What did you do Spolsky: We started a consulting business and we hired a couple really smart
people. We had a few clients. We did the whole $60/$250 thing, which was great, and that business then disappeared very rapidly out from under us. So we became just a real software company.
Livingston: But you still kept a lot of your culture for the programmers. Spolsky: Oh yeah. That was always sort of the goal, really, in creating Fog Creek.
If you are in Boston, Austin, Raleigh-Durham, Silicon Valley, or Seattle, as a programmer you have a lot of choices of where to work. In New York, the choices are investment banks, some hospitals, advertising agencies but not technology companies. There are very, very few technology companies in New York. But New York still is the largest city in America, and there are an awful lot of programmers who are stuck in New York because their wife is going to medical school, or their family is there, or they just love the city, or they want to do improv theater and this is the best place to do it millions of reasons why a programmer might find themselves in New York. Every programmer wants to work at a product company because it is so much better than working as a slave in an investment bank. And there were none in New York. We would go to parties, and we d find geeks, and they d say, Do you know of any software product companies in New York where I can work And we would say, Gee, no. I can t really think of any. This is what programmers would talk to each other about: how can I get out of the investment bank in New York So part of our model was, Let s create a fun place for us to work, since we are stuck in New York City. Create a software company specifically in New York City. With many programmers, you are sort of peripheral to the goal of the company and you are doing a peripheral path, so that you re never a part of the company and nobody cares about you.
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